Professional Documents
Culture Documents
51 Issue 3
Using a non-parametric data envelopment analysis (DEA) approach, this paper compares the price of each car model in a segment of the personal car market with the best possible price in view of the technology available given its particular combination of characteristics. In this approach, a car model is defined as price efficient if it offers customers the highest value per dollar spent for that set of characteristics. Likewise, a car model is inefficient if there is some other car model with a lower price having equivalent or higher quality, whereby a measure of the price efficiency is determined by the price reduction needed to make a car model efficient. The data set covers 141 different year 2002 car models, as appeared in Consumer Reports magazine. The vehicles that are listed by Edmunds.com as consumers most wanted are compared with those at the top of our efficiency list. It is found that the majority of cars at the top of our list are also listed as most wanted by Edmunds.com. Evidently, consumers who usually make decisions based on price and quality information will naturally employ a heuristic such as buy car models at the top of price efficiency list if this list is made available to them.
Introduction
There has been considerable change in the automotive industry. Product life cycles have shortened, internal competition has increased and competition has become a worldwide phenomenon. The product is becoming increasingly important and strategic in corporate marketing mixes in this new context; therefore, the product development process ensures that car models perceived of higher value will fulfil the needs of the highest possible number of customers more satisfactorily and rapidly.
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Car manufacturers are required to address increasingly specific market needs while still providing value, in order to ensure success and thereby maintain or improve their position with regard to competitors. Substantial price dispersion has been found or implied in a large number of studies in actual retail automotive markets (examples are Benham 1972; Pratt et al. 1979; Maynes & Assum 1982; Dahlby & West 1986; Shugan 1988). For the simple reason that consumers are assumed to maximise their utility, this is strong evidence that consumers are less than perfectly informed about the alternatives that are available in consumer markets (see, for example, Oxenfeldt 1950; Bettman 1979; Beals et al. 1981; Maynes & Assum 1982). The literature indicates several reasons why consumers may make choices without being fully informed. The consumer is faced with the non-availability of desired information (Feldman & Spencer 1965) and the cost of time needed to acquire information (Mitchell & Sorenson 1986; Ratchford & Gupta 1987). There are limitations of processing capacity (Bettman 1979; Beals et al. 1981) culminating in consumers insufficient capability to understand all available information (Sepstrup 1978). Especially in automotive markets, technical complexity and the multi-component nature of products (Maynes & Assum 1982) potentially affect price dispersion. That consumers make purchase decisions based on maximising their utility function with imperfect information raises some obvious questions. How are the car models positioned in the market in terms of providing consumers a set of utilities at a certain price? How does such position relate to its market performance (e.g. sales)? To address these questions, the utility derived from personal cars might be an interesting area in which to perform consumption efficiency analysis to examine which cars satisfy a consumers needs, given their respective costs. The critical point behind consumption efficiency is then how to identify and measure these needs. Before one can conclude that consumers do not reach their consumption frontier with the amount of money they spend, i.e. they are inefficient in their consumption bundle, the consumption frontier must be objectively defined. Obviously, summation over utilities for different consumers is not objectively measured as is summation over production from different plants. Studies in production, such as that by Womack et al. (1990), are typically directed to analysts and potential car owners as well, and indicate that consumers should purchase car models that are cheaper, have lower variable and service costs, have a longer life and higher performance than
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cars made by a different production technology. Many car owners, car magazines, journalists and experts (e.g. Consumer Reports, Annual Auto Issue, 2002, and J.D. Power Associates, www.jdpower.com) seem to agree with that. Various marketing investigations among car owners show that some car models perform better in many respects than the others. The tests from car magazines, though, are rather subjective and reflect the drivers personal evaluation of the tested car. In addition, cars are often tested against each other, without investigating whether both cars are inefficient. Furthermore, such tests do not quantify how efficient the recommended car model is or how inefficient the non-recommended one is. The purpose of this study is to examine if and to what extent some car models/makes are superior and, more importantly, whether such superiority are turned into larger sales. The results of this study are valuable not only to consumers but also to producers. For instance, are consumers most wanted cars also the most efficient car models? Alternatively, are the least efficient car models the consumers least wanted? This study intends to provide consumers with advice to avoid certain car models as being inefficient for one or more reasons, and by doing so increase consumer welfare. The study may further inform an automotive producer whether its competitors presumptive model is superior to its own and in that case what substantial improvements are required in order to turn its inefficient car into an efficient one. The method applied to evaluate this is the data envelopment analysis (DEA) approach, using economic and technical data for 141 different models in 2002, from Consumer Reports. This paper is organised as follows. A simple presentation of the DEA approach and its input-orientated formalisation is provided. Next, car models are evaluated and the main findings summarised. Finally, a general sales model with some additional criteria is provided and discussed, and the conclusions and managerial implications summarised.
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technology available at its particular combination of characteristics. It also allows the identification of a set of efficient brands used as the standard of comparison. Finally, this measurement provides some instructions on how to make a brand price-efficient. Using Kamakura et al.s approach, a brand can be defined as efficient if it provides the highest value per dollar spent for that set of characteristics where an efficient brand would be assigned a value of 1 on a price-efficiency scale. Efficiency of any particular brand is measured as the ratio between the efficient price and the actual price paid. A potentially useful application of Kamakura et al.s study might involve providing lists of inefficient brands or providing price ranges in which inefficient brands would be efficient. Such information would potentially be useful to a consumer. We apply the methodology set forth in Kamakura et al.s study to a number of car models in automotive markets. Let us return to economics and work with measured costs and benefits. Consider a rational consumer who pays an amount of money, p, to purchase and drive a car, y. In fact, in purchasing a car, y, one buys a bundle of technical characteristics, t, such as space, weight, engine power, etc., which provide the owner with a utility Uy(p, t). We consider p as the economic or price variable. Obviously, the first partial derivative with respect to p is negative (the more expensive a car, the less utility it yields) and with respect to t is positive (the higher the technical performance, the higher the utility). For a given utility level derived from a car, y, we obtain that dt/dp = yp/yt, i.e. the rate at which the car buyer is willing to substitute technical performance for costs equals the ratio of derivatives of the utility function. It is assumed that dt/dp > 0, i.e. indifference curves between costs and technical performance have a positive slope, if the lower utility from higher costs is compensated by the higher utility from higher performance. Fare and Grosskopf (1994), among others, have formalised inputorientated DEA models. A detailed description of a DEA model can be found in Banker and Morey (1986). They extended the original model to empirical data involving ordinal or nominal characteristics. This extension was incorporated into Kamakura et al.s study, as well as ours. We will not present the detailed procedures on how the DEA model is applied. This study determines the efficiency by mathematically solving the following problem (adapted from Banker et al. 1984).
m g (Max)Zk + sr+ + si r =1 hj , sr , si i =1
(1)
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(r = 1, 2, , g) (i = 1, 2, , m)
x h
ij j =1 n j =1
+ si = xik
= 1
hj , sr+ , si 0 (j = 1, 2, , n)
(5)
where n is the number of car models for each category, m the number of inputs, g the number of outputs, xij the level of i-type input for car model j, prj the level of r-type output (car characteristic) for car model j, Zk is the efficiency ratio for the car model under consideration, is a very small constant, sr+ and si are slack variables for output r and input i, and hj is the weight for car model j. The slacks measure, in addition to the price reduction, how many more of the attributes should be offered by the inefficient car models to make them efficient (Kamakura et al. 1988). According to these models, the objective is to reduce the eventual slack in inputs (costs) without reducing the optimal output (technical performance). If, for instance, the input slack is equal to unity, the observed car is efficient. If, on the other hand, the input slack is less than unity, the car under investigation is inefficient. A computer program is utilised to solve the above DEA models for each of the nine car categories. Given these quality indexes, we employ the same definition of efficiency as employed by Hjorth-Anderson (1984) and Kamakura et al. (1988). Hence, a car model is inefficient if there is some other car model with a lower price having equivalent or higher quality, and the price reduction needed to render the chosen car model efficient provides a measure of the loss incurred by choosing an inefficient car model.
Determinant attributes
Cars are extremely differentiated products. If producers intend to satisfy the consumers preferences, they have to offer many possibilities of choice. The entire spectrum of factors or characteristics can be very large, covering space, motor power, safety, price, reliability, dimensions, and so on.
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Obviously, in order to evaluate the efficiency of a particular car, all these characteristics should be taken into account. The problem that a car buyer faces, however, is that some of these factors (such as driving features, design, safety, reliance) are not objectively measured. A car buyer must rely either on car manufacturers who claim that their models are superior to those of their competitors, on professional car magazines, or on the objective and measurable characteristics. All determinant attributes need to be included in the DEA study because the efficiency calculation depends on the assumption that utility is estimated correctly. A buyer may not have sufficiently good information on some of these attributes that are in the DEA calculation to make comparisons of the attractiveness of the bought model with its competitors models. In addition, a list of attributes, which could be assigned to each competing model, is developed independently of the buyers knowledge. These attributes need to capture salient dimensions as well as possible. Gupta and Ratchford (1992) uncovered five dimensions from a set of concrete attributes that determine a consumers choice of selecting car models. Starting from their perceptual constructs, we compile a corresponding list of attributes that are available for each car model in our data set. In particular, an exhaustive list of ratings of each of the 141 cars in the study on attributes available in Consumer Reports was assembled. Eliminating all attributes in the Consumer Reports data that were not significantly related to at least one perceptual dimension developed by Gupta and Ratchford (1992), and eliminating redundant attributes, led to a list of ten attributes for which objective data were readily available, and which were significantly related to one or more of the perceptual constructs. A problem is that these ten attributes may not adequately capture differences in quality, performance and style, which were identified as important attributes by Gupta and Ratchford (1992). Unfortunately there is no clean objective analogue of these attributes. However, since they may be an important influence on consumer choice, a reasonable measure of these attributes for each of the 141 car models identified in this study was required. Our solution was to establish attribute ratings utilising studies published by J.D. Power and Associates. The automobile consumer satisfaction ratings given by J.D. Power and Associates are based on surveys of actual automobile owners, and cover issues such as owner-reported problems with the vehicle and measures of a consumers satisfaction with particular characteristics of the vehicle.
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In general, the attributes used as the basis for our analysis do a reasonable job of capturing variation in the perceptual attributes that consumers appear most likely to use in differentiating among car models. The attributes considered in this study were those listed by Consumer Reports and J.D. Powers website (as shown in Table 1). The first ten attributes are objective measures. The rest of the attributes are subjective ratings on a 5-point scale. These 16 attributes (ten objective attributes plus ratings of six variables including comfort and styling) were used to capture most of the variation in the major perceptual constructs identified by Gupta and Ratchford (1992), and we have some confidence in assuming that they are capturing the major dimensions used by consumers in buying automobiles. The choice of these variables was not made arbitrarily. In fact, none of the relevant technical performance characteristics published in the magazine was left out. In addition, this study includes a measure of safety, given that data on airbags are available. This study is based not only on many measurable characteristics always used in car tests but also the selected parameters covering a large part of all possible subjective parameters that consumers consider when they decide to purchase a new car. Many car owners (and potential buyers as well) are driven by such soft or non-measurable parameters. Therefore, the selected performance parameters are rather comprehensive in this study. The price characteristic is the only characteristic that is treated as an economic parameter (input
Table 1 Automobile characteristics
Source Characteristics
Consumer Reports 1. Horse power 2. Seating (number of seats) 3. Length (inches) 4. Width (inches) 5. Weight 6. Drive wheel 7. Safety belt 8. Airbags (head); airbags (side) 9. ABS 10. Traction aid J.D. Power and Associates 11. Mechanical quality 12. Body and interior quality 13. Reliability 14. Feature and accessory quality 15. Performance (including acceleration and handling stability) 16. Style
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variable) and therefore minimised instead of maximised. However, as was mentioned at the beginning of the paper, these characteristics cover by no means all the possible parameters a car owner had in mind before making a purchase decision.
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its brand/model positioning/repositioning is likely to miss opportunities to capture new competitive advantages because of market structure changes brought about by competitors. In order to calculate efficiency under the two-step decision-making process, the relevant choice set had to be defined. Since consumers should be able to readily classify cars into general types simply by looking at them, it was felt reasonable to assume that consumers make an optimal choice of type of car (e.g. family vs luxury), and that the relevant alternatives for calculation of efficiency are other car models within the chosen type. That is, we assume that a consumer can readily tell the difference between general types of cars, but cannot tell which model within a type is best without more extensive search. Accordingly, the models that we employ in our efficiency calculations are other models in the general class in which the consumer made his or her choice. We employed the classification scheme used by Consumer Reports the magazine that publishes car model ratings in classifying each of the 141 models into one of nine classes. As mentioned above, these are family cars, small cars, large cars, luxury cars, upscale cars, minivan, sporty cars, SUVs and trucks. For car models that were estimated to be lower in quality but higher in price than at least one other alternative, efficiencies were calculated as in equations (1)(5) of the DEA model presented above. The results, which were calculated for quality scales constructed according to the two-step decision-making process outlined above, are presented for each car model/ make in Tables 25.
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Table 3 Inefficient cars classified according to price efficiency estimated by CRP* frontier
Group I: Family cars Mazda 626 Infiniti G20 Dodge Intrepid Nissan Maxima Oldsmobile Intrigue Mitsubishi Galant Volvo S40/V40 Pontiac Grand Prix Buick Regal Buick Century Chrysler Sebring Group II: Luxury Mercedes-Benz S-Class Lexus LS430 Cadillac Seville Jaguar S-Type Group III: Sporty cars Porsche Boxster Mercedes-Benz SLK Chevrolet Corvette BMW Z3 Honda S2000 Group IV: SUVs Toyota Land Cruiser Acura MDX Infiniti QX4 Isuzu Trooper Lexus RX300 GMC Yukon Toyota Sequoia Nissan Pathfinder CRP 0.8273 0.8505 0.8616 0.8855 0.9116 0.9164 0.9197 0.9201 0.9467 0.9494 0.9522 Group IV: SUVs (continued) Chevrolet Suburban Chevrolet Tahoe Group V: Trucks Ford Explorer Sport Trac GMC Sonoma Ford F-150 Dodge Dakota Group VI: Minivans Oldsmobile Silhouette Pontiac Montana Chrysler Town & Country Nissan Quest Group VII: Small cars Mercedes-Benz CLK Toyota Prius Pontiac Sunfire Honda Civic Mazda Protg Chevrolet Monte Carlo Chevrolet Cavalier Group VIII: Upscale cars Volvo S80 Saab 9-5 Lincoln LS Oldsmobile Aurora Saab 9-3 Group XI: Large cars Buick Park Ave Mercury Grand Marquis CRP 0.9139 0.9907
0.7510 0.9626
* CRP: constant return to performance, the producers are able to linearly scale the inputs and outputs without increasing or decreasing efficiency.
in Table 4. All car makes are classified (again based on average efficiency) and presented in Table 5. The results in Table 4 indicate that, under the two-step decision-making process, in terms of car type, the truck sub-market has average efficiency of 0.9901, with 66.7% of the tested trucks being efficient. The minivan sub-market follows, having a slightly lower efficiency at 0.9747, with
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71.43% of its tested cars efficient. The large and upscale sub-markets performed similarly, with efficiencies of 0.9591 and 0.9519 respectively; and, respectively, 71.43% and 58.33% of the tested cars in these two categories are efficient. While estimated mean efficiency is lowest for sports cars (0.9015), this is also the type most likely to have attributes not well captured in our data (e.g. sportiness); consequently, the estimates in this category should be treated with some caution. Efficiencies will tend to be lower for categories having a larger number of alternatives because the cost of acquiring and retaining the information on these will be greater: after a point, it will be more cost-effective to risk losses rather than to seek more information. We measure the number of alternatives as the number of models in the class in which the consumers choice occurred (car models in a category). The correlation between these two is 0.466, a negative correlation, significant at alpha = 0.05. By our definition, inefficiency is the price reduction that a consumer could get from choosing some lower-priced model of equal utility. Since the expected price differential between the chosen model and the better alternative increases with the dispersion of prices in that category, inefficiency should increase (or efficiency should decrease) with the dispersion of prices in the category. We measure price dispersion as the standard deviation of prices in the class in which the consumers choice occurred (std dev. of prices). The correlation between these two is 0.518, a significant negative relationship at alpha = 0.05. If one is interested in the most frequent efficient cars with which the method chose to compare the inefficient cars, the models shown in Table6 dominate in respective car groups. However, it is not clear if these cars appear frequently because they are super-efficient, or if they are chosen to project the inefficient cars because they happen to lie near the majority of inefficient cars. For instance, a Mercedes-Benz C-Class customer will be satisfied with the distinct characteristics of his/her efficient car, without bothering if this model is regarded as an alternative model to, say, the inefficient BMW 5-series. Finally, there are six car makes that share first place as far as the total number of efficient models among the tested is concerned: the German Audi, with two out of two models; the American Jeep with two out of two; the Korean Hyundai with three out of three; the American Saturn with two out of two; Subaru with three out of three; and Volkswagen with four out of four. The results in Table 4 also indicate the average performance in terms of efficiency among the four countries. As expected, under the two-step
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Family cars Chevrolet Impala, Chevrolet Malibu, Ford Taurus, Honda Accord, Hyundai Sonata, Saturn L-Series and Volkswagen Passat Luxury cars Audi A6/Allroad, BMW 5-Series, Cadillac DeVille, Lexus GS300/GS430 and Lincoln Continental Sporty cars Chevrolet Camaro, Ford Mustang and Toyota Celica; SUV Hyundai Sante Fe, Pontiac Aztek and Suzuki Vitara/XL-7 SUVs Trucks Minivans Hyundai Sante Fe, Pontiac Aztek and Suzuki Vitara/XL-7 Nissan Frontier and Toyota Tundra Chevrolet Venture, Chrysler Voyager, Dodge Caravan/Grand and Mazda MPV
Small cars Saturn S-Series, Toyota Echo, and Volkswagen Jetta Upscale cars Large cars Infiniti I35 and Mercedes-Benz C-Class Buick LeSabre, Chrysler Concorde and Ford Crown Victoria
decision-making process, the lowest efficiency in terms of CRP is obtained for the European cars (0.8879, with 60% of its tested car models efficient), and the highest for the Korean cars (1.000, with 100.0% of its tested car models efficient). On the other hand, there are significant differences between the European (as above) and US efficiency scores (0.9700, with 63.01% of tested car models efficient). The Japanese efficiency (0.9413, with 62.22% of its tested car models efficient) is higher for the CRP than the efficiency of the European cars. The US car efficiency is higher than that of the Japanese cars. In Table 4, the mean efficiency of all year 2002 car models in the automotive market under the two-step decision-making process is 0.9499, with 63.12% of the tested car models being efficient. In particular, as shown in Table 5, mean efficiency by car make ranges from 0.5784 for Porsche (i.e. an average price reduction of 42.16% is needed to render this make efficient) to 1.0 (Audi, Hyundai, Jeep, Saturn, Subaru, Suzuki and Volkswagen). Mean efficiency lies between 0.90 and 1.0 in 26 car makes, 0.85 to 0.90 in four makes, 0.70 to 0.85 in two car makes, and less than 0.70 in one car make. The most efficient car makes are Audi, Jeep, Saab, Subaru, Saturn, Nissan, Hyundai, Ford, Volkswagen, Mercury and Dodge. The least efficient car makes are Porsche, Mitsubishi, Volvo, MercedesBenz, Isuzu, Infiniti and Acura.
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brand equity evaluation model employed by the Allgemeiner Deutscher Automobil Club (ADAC) (2001), brand strength is measured as an index of brand awareness, recognition, image and sympathy. The brand image data were taken from the 2003 driver survey conducted by the ADAC. The number of problems detected by cars in 2002 is also used to correlate with the brand efficiency scores. The first correlation is significant at alpha = 0.10 and, as expected, the coefficient is negative (sig. = 0.099; coefficient = 0.46). The second correlation is significant, too, but the coefficient is positive (sig. = 0.07; coefficient = 0.35). The results show that the efficient brands are those with lower brand images and tend to be those with more car maintenance problems detected later. Put another way, the consumers experience fewer maintenance problems with using those inefficient cars.
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on determinants of sales, or on gains from the effort to affect efficiency. Both Punj and Staelin (1983) and Ratchford and Srinivasan (1989) have studied the determinants of cost savings (discounts) on cars, and Carlson and Gieseke (1983) have studied the determinants of savings on groceries, but we do not know of any recent field studies of the determinants of sales related to efficiency. It would be interesting to investigate if and to what extent new car owners behave according to the efficiency estimates of this study. If these estimates were known to everybody and no other characteristics were taken into account before the cars were purchased, our normative approach would imply that the inefficient models should be avoided. This can be tested using the sales statistics of year 2002. It is expected that efficient car models have larger than average sales, as suggested by economies of scale or economies of scope. Besides the efficiency consideration, a typical ultimate consumer asks two questions in purchasing an automobile: 1. What is its potential trade-in value? 2. Will I get reasonable MPG? On the other hand, customer satisfaction in general could have an effect on sales. Regressions with these factors as predicting variables are suggested in exploring this relationship between sales and efficiency scores.
The model
Following the above discussion, we postulate that increasing sales depend on a production process incorporating the efficiency of the car model, its depreciation rating, MPG and customer satisfaction about the car model. In order to simultaneously test our hypotheses about the impact of factors, efficiency, MPG, depreciation and satisfaction on sales volume, we build a multiple regression model using sales as the dependent variable. Independent variables are defined below. The parameters are estimated including all the car models within each car category that have sales figures available: DV: sales volume (by units) IVs: efficiency score (calculated through DEA, ranging from 01.0); satisfaction ratings on a 5-point scale; MPG; and depreciation (ratings on a 5-point scale).
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Specifically, we can represent the determinants of sales by the following relation: S = f (E, D, M, Sat, e) (6)
where S denotes sales, E is the efficiency of the car model, D is the depreciation, M is gas efficiency measured by MPG, Sat is the satisfaction with the car model, e is a random error term, and f is function. Equation(6) describes a function relating to sales. Higher performance on any of these predictors should lead to higher sales.
Luxury cars 0.073 Constant Efficiency 1.685 Depreciation 1.588 Miles per gallon 1.252 Customer satisfaction 1.125 SUVs 0.086 Constant Efficiency 0.582 Depreciation 0.079 Miles per gallon 0.227 Customer satisfaction 0.369
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level 0.10, we can conclude that there is a highly significant impact on sales depending on the efficiency (beta = 0.582, sig. = 0.009). The positive sign of the significant beta coefficient of efficiency tells that, as efficiency increases, sales gains increase. Cars with higher customer satisfaction, better MPG and depreciation did not garner higher sales in the SUV car category, probably owing to the popularity of SUVs and minivans, which are typically gas-inefficient cars. Evidently, the high-efficiency car models are the best buy for many consumers purchasing luxury cars and SUVs. While one might assume MPG to be positively related to sales, the correlation between these two across SUV car models was not significant. It appears that consumers who face brands that provide an unfavourable position on MPG are generally able to compensate for this with other attributes. The luxury cars that sold well are those with high efficiency, good MPG and better customer satisfaction. Those best-selling luxury cars also tend to be the ones that depreciate fast. The SUVs that sold well are those that are efficient. The trucks that sold well are those that are less efficient but have good depreciation value. The family cars that sold well are those that are efficient, but the small cars that sold well are those that are less efficient and depreciate fast.
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European cars performed best in depreciation, followed by Japanese cars. American cars showed greater depreciation than European and Japanese cars, but Korean cars showed the highest level of depreciation. European cars have the highest MPG, while American cars fare worst in the MPG category. Japanese and Korean cars perform comparably well in the MPG category. Overall, European cars are priced much higher than the cars of the other three countries. By car type, family cars have the highest MPG, and trucks perform the worst on this criterion, although trucks are the most efficient buy compared to other cars, followed by family cars. Sporty cars and SUVs do the best in terms of depreciation, followed by trucks and luxury/upscale cars. Potential car buyers always wonder if the car under consideration is worth purchasing, as compared with other competitive cars. This study was an alternative approach to help potential buyers find the best car among a variety of models.
Producers perspective
Recent visitors to Edmunds.com cast more than 80,000 votes for the 2002 Consumers Most Wanted vehicle awards. Which economy sedan stands out from the crowd? Which luxury SUV towers over the rest? How do consumers choices compare with those on our efficient car list? Are the efficient cars the Consumers Most Wanted? Are the consumers least wanted also the inefficient cars? Figure 1 provides a profile of the efficiency and the degree of being wanted by consumers for car models in the nine categories. Clearly, the precise boundary positions between quadrants are subjective. What is apparent, however, is that no matter where the boundaries are drawn, some car models that score well on efficiency are not greatly desired by consumers. This is despite the more general trend, also apparent, that higher overall efficiencies are associated with a higher degree of being wanted. Clearly, judging long-term viability on the basis of overall efficiency alone would overlook some car models good at attracting customers. In Figure 1, car models located in the upper-right quadrant should be viable so long as they at least maintain (in the long term) that position. Any scope for improved overall efficiency will reinforce the viability of these car models. The long-run viability of car models located in the bottom-right quadrant depends on any prospects for improved marketing communication/promotion strategies. There is probably a lot of scope for generating further growth of buyers interest. The low degree of
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Most Small cars: Honda Civic; Mercedes-Benz CLK Family cars: Nissan Maxima Luxury cars: Lexus LS 430; Acura 3.5RL Upscale cars: None Large cars: None Sporty cars: Honda S2000; Porsches Boxster; Chevrolet Corvette SUV: Nissan Pathfinder; Toyota Sequoia; GMC Yukon; BMW X5; Acura MDX Trucks: Ford Explorer; Dodge Dakota; Ford F-Series Minivan: None Consumers wanted Small cars: Hyunda Elantra; Nissan Sentra; Ford Focus; Subaru Impreza; Volkswagen Jetta; Volkswagen Golf Family cars: Honda Accord; Volkswagen Passat; Toyota Camry; Subaru Legacy and Outback; Ford Taurus Luxury cars: BMW 5 Series, Audi A6; Lexus GS 300 and 430 Upscale cars: BMW 3 Series Large cars: Toyota Avalon; Pontiac Bonneville Sporty cars: Mazda Miata; Ford Mustang; Ford Escape; Toyota Celica; Audi TT; BMW M3 SUV: Mazda Tribute; Toyota RAV4; Nissan Xterra; Toyota Highlander; Toyota 4Runner; Dodge Durango Trucks: Toyota Tacoma; Nissan Frontier; Toyota Tundra; Chevy Silverado Minivan: Honda Odyssey High Eciency of car models Small cars: Chevrolet Cavalier; Pontiac Sunfire Family cars: Pontiac Grand Prix; Dodge Intrepid; Chrysler Sebring; Pontiac Grand Am Luxury cars: Cadillac Seville Upscale cars: Saab 9-5; Volvo S80; Lincolns LS; Saab 9-3 Large cars: Buicks Park Avenue Sporty cars: BMW Z Series SUV: Isuzu Trooper Trucks: GMC Sonoma Minivan: Chrysler Voyager; Town & Country; Nissan Quest Small cars: Dodge Neon Family cars: Saturn L-Series; Mercury Sable Luxury cars: Cadillac DeVille; Lincolns Town Car; Lincolns Continental Upscale cars: Chrysler 300M; Infiniti I35; Mercedes-Benz C-Class Large cars: Buick LeSabre; Ford Crown Victoria Sporty cars: Audi TT; Pontiac Firebird; Mercury Cougar SUV: Chevrolet Tracker; Suzuki Vitara; Isuzu Rodeo Sport; Suzuki Vitara/XL-7; Mitsubishi Montero Trucks: Ford Ranger; Chevrolet S-10; Mazda Truck; GMC Sierra Minivan: Toyota Sienna; Caravan/Grand Caravan; Mazda MPV; Ford Windstar Least
Low
being wanted of efficient car models could be the result of poor market positioning or the lack of effort in convincing consumers of the excellence of product attributes. Otherwise these car models are viable. With an effective promotion and positioning strategy, the producers should be able to move these car models to the upper-right quadrant. Car models located in the upper-left quadrant are the lucky ones, which are wanted by consumers despite their low efficiency scores. Longterm viability should be expected from them through scope for improved efficiency, a possible result of developing salient and unique benefits to differentiate from competitors. Car models in the bottom-left quadrant offer low efficiency and are not much desired by consumers. There is scope for improvement in the product features and hence the overall efficiency
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of these car models. The producers also need to develop more effective marketing promotion or positioning strategies to improve the overall marketing performance of these car models. Furthermore, it is found that car models in different car categories are not distributed in the same pattern as depicted in the four quadrants of Figure 1. Figure 1 shows evidence that the degree of being wanted by consumers is not always consistent with the efficiency score. Clearly, no car models from categories of upscale cars, large cars and minivans are located in the upper-left quadrant (very few in the upper-right quadrant), but a significant number of car models from these three categories are found in the bottom-right quadrant. This indicates that better positioning and promotional strategies are needed to market these cars. Also, the majority of car models from the sporty and SUV categories are located in the two mis-perceived quadrants (upper-left and bottom-right). This might be due to the missing attribute of sportiness in our DEA estimation.
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Since explicit weights are given to car characteristics, if a considered car accelerates slowly and is limited in horsepower, that car might be perfectly efficient to a potential buyer who is not interested in these criteria. Professional tests in this field can calculate how expensive the horsepower of an Audi is, how high the shadow price of safety for a Volvo is, or how expensive the design of a BMW is.
References
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